First Merchants’ third quarter results met Wall Street’s revenue expectations, with management pointing to robust loan growth and a resilient balance sheet as key themes. CEO Mark Hardwick highlighted the 9% annualized loan growth and deposit mix improvements, noting, “We delivered another 9% loan growth quarter… and the efficiency ratio was 55%, which is consistent with the high performance we strive for.” The acquisition of First Savings Financial Group was a prominent topic, as leadership emphasized its potential to enhance fee income and expand in Southern Indiana. Management also cited a disciplined approach to deposit pricing and relationship-building as contributors to performance, even as deposit costs edged up to remain competitive.
Is now the time to buy FRME? Find out in our full research report (it’s free for active Edge members).
First Merchants (FRME) Q3 CY2025 Highlights:
- Revenue: $166.1 million vs analyst estimates of $165.6 million (6.5% year-on-year growth, in line)
- Adjusted EPS: $0.99 vs analyst estimates of $0.96 (2.9% beat)
- Adjusted Operating Income: $72.24 million vs analyst estimates of $77.68 million (43.5% margin, 7% miss)
- Market Capitalization: $2.11 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From First Merchants’s Q3 Earnings Call
- Damon Del Monte (KBW): Del Monte pressed on expense outlook and core expense growth post-merger. CFO Michele Kawiecki projected Q4 expenses in line with Q3, with disciplined cost control as integration progresses and more clarity on 2026 guidance expected next quarter.
- Nathan Race (Piper Sandler): Race inquired about deposit pricing trends and the impact of additional rate cuts. Kawiecki said competition remains intense but expects more rationality as further rate cuts materialize, and confirmed the bank can flexibly reprice about $2.5 billion in indexed deposits.
- Race (Piper Sandler): Race also questioned plans for the acquired triple net lease portfolio. CEO Mark Hardwick explained the portfolio provides strategic optionality to hold or sell, depending on relative yields and loan growth in the legacy bank.
- Daniel Tamayo (Raymond James): Tamayo asked about the sustainability of strong C&I loan growth. President Michael Stewart described current growth as “core bread and butter” activity with no unusual drivers, and expects momentum to continue based on current pipelines.
- Brian Martin (Janney): Martin explored margin sensitivity and asset optimization. Kawiecki detailed the expected repricing of fixed-rate loans and ongoing use of securities portfolio roll-off to fund higher-yielding loans, while noting First Savings will reduce the bank’s overall asset sensitivity.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace and success of integrating First Savings Financial Group, including the rollout of its SBA lending platform across new markets; (2) trends in deposit costs and the bank’s ability to defend net interest margin amid potential rate cuts; and (3) sustained loan growth and credit quality stability, especially in light of ongoing competitive and macroeconomic pressures. The impact of major competitor consolidation in Michigan and Kentucky will also be key.
First Merchants currently trades at $36.60, in line with $36.60 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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